Cisco 2011 Annual Report Download - page 117

(b) Long-Term Debt
The following table summarizes the Company’s long-term debt (in millions, except percentages):
July 30, 2011 July 31, 2010
Amount Effective Rate Amount Effective Rate
Senior Notes:
Floating-rate notes, due 2014 ........... $ 1,250 0.60% $— —
5.25% fixed-rate notes, due 2011 ........ —— 3,000 3.12%
2.90% fixed-rate notes, due 2014 ........ 500 3.11% 500 3.11%
1.625% fixed-rate notes, due 2014 ....... 2,000 0.58% ——
5.50% fixed-rate notes, due 2016 ........ 3,000 3.06% 3,000 3.18%
3.15% fixed-rate notes, due 2017 ........ 750 0.81% ——
4.95% fixed-rate notes, due 2019 ........ 2,000 5.08% 2,000 5.08%
4.45% fixed-rate notes, due 2020 ........ 2,500 4.50% 2,500 4.50%
5.90% fixed-rate notes, due 2039 ........ 2,000 6.11% 2,000 6.11%
5.50% fixed-rate notes, due 2040 ........ 2,000 5.67% 2,000 5.67%
Total ........................... 16,000 15,000
Unaccreted discount ...................... (73) (73)
Hedge accounting adjustment ............... 307 298
Total ........................... $16,234 $15,225
Less: current portion ...................... —(3,037)
Total long-term debt .............. $16,234 $12,188
In March 2011, the Company issued senior notes for an aggregate principal amount of $4.0 billion, including
$1.25 billion of senior floating interest rate notes due 2014, $2.0 billion of 1.625% fixed-rate senior notes due
2014, and $750 million of 3.15% fixed-rate senior notes due 2017. To achieve its interest rate risk management
objectives, the Company entered into interest rate swaps with a notional amount of $2.75 billion designated as
fair value hedges of the fixed-rate senior notes included in the March 2011 debt issuance. In effect, these swaps
convert the fixed interest rates of the fixed-rate notes to floating interest rates based on LIBOR. The gains and
losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value
of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. See
Note 11.
The effective rates for the fixed-rate debt include the interest on the notes, the accretion of the discount, and, if
applicable, adjustments related to hedging. Based on market prices, the fair value of the Company’s long-term
debt was $17.4 billion as of July 30, 2011. Interest is payable semiannually on each class of the senior fixed-rate
notes and payable quarterly on the floating-rate notes. Each of the senior fixed-rate notes is redeemable by the
Company at any time, subject to a make-whole premium.
The senior notes rank at par with the issued commercial paper notes, as well as any other commercial paper notes
that may be issued in the future pursuant to the short-term debt financing program, as discussed earlier under
“Short-Term Debt.” The Company was in compliance with all debt covenants as of July 30, 2011.
Future principal payments for long-term debt as of July 30, 2011 are summarized as follows (in millions):
Fiscal Year Amount
2014 ............................................. $ 3,250
2015 ............................................. 500
2016 ............................................. 3,000
Thereafter ......................................... 9,250
Total ......................................... $16,000
109